Did Rural Micro-Entrepreneurs Do Make A Higher Gain? A Preliminary Study on The Potential of Supply Chain Digitalization Using PLS-SEM Approach

Abstract

Studies on digitalization disruption and its impact on business are gaining global attention, especially among small and medium entrepreneurs (SMEs). It is theoretically expected to be a business value add element in terms of capability and competitiveness in the supply chain ecosystem, which is fundamental in business success. But digitalization also has its own risks and challenges including expertise, capital, cooperation, incentives, and support from other economic units, such as other merchants and customer preferences. Failure in digitization can lead to mistrust and negative perceptions that may lead to effects the SME growth. Among the biggest digitalization challenges are for the rural micro-entrepreneurs (RME) who live in areas that lack digital support facilities and technological capabilities, such as a weak internet connection and native customer's desire to buy using online shopping platforms. This study will analyze the competitive level of RME businesses from a supply chain perspective. To analyze the impact of supply chain digitization (DSC), a mediator effect will be used. DSC will be applied in mediator effect to entrepreneurial supply chain towards the level of RME’s business competitiveness. The hypothesis of this study is DSC practice has a role on the growth of RME business competitiveness. Using the Partial Lease Square-Structural Equation Modeling (PLS-SEM) method, this study found that RMC’s efforts on business digitization do not have a significant impact on the development of business competitiveness. The hypothesis of this study was confirmed by the rate of P-value. While DSC mediator effect through variance accounted for (VAF) calculation found that there is low partial mediation (23%). This paper proposes a further study on the elements of competitiveness and the desire for digitalization of RMC to be investigated, while the current need for a comprehensive DSC model of RMC particularly, in line with rural economic development issues in Malaysia.